Like
Julia Gillard
,
Tony Abbott
needs a big national cause: something that can capture the public imagination, allow the government to escape the clutches of sectional interests and satisfy the public’s desire for strong, prime ministerial leadership.

Unfortunately Gillard never found the great cause she needed to raise herself above her union backers and the hung parliament.

But the Treasurer,
Joe Hockey
, and his deputy,
Arthur Sinodinos
, have found a compelling cause for Abbott to embrace: economic reform, productivity and growth.

In speeches and articles, Hockey and Sinodinos have been warning the public – and, no doubt, their colleagues – of the need for accelerated productivity growth to keep living standards rising and the budget in surplus in an era of declining commodity prices. Structural reform and targeted infrastructure investment are a critical part of securing that growth.

The argument should appeal to Abbott. A strong reform agenda, implemented now, would start delivering the productivity dividends he may need to boost employment, incomes and tax revenue in the second, more vulnerable half of his government’s life.

Related Quotes

Company Profile

His promise of a unified, experienced team of ministers quietly getting on with the business of professional, no-surprise government is a welcome change for the public after the noisy disunity of Labor. But it does not fit naturally with the political theatre usually associated with selling difficult economic reform.

Abbott’s first term will generate plenty of inquiries and reviews – from the national audit of government programs and the reviews of taxation, the financial sector and industrial relations to the inquiries into car manufacturing and child care. Each will produce its quota of recommendations for politically difficult, growth-enhancing reform, some of the most difficult of which allegedly will be taken by Abbott to the 2016 election.

Reforms will need intensive selling

Yet Abbott buckled under the pressure of a Labor GST scare campaign before the unloseable 2013 election.

The reform that Hockey and Sinodinos are talking about will take some intensive selling. Structural reform boosts growth through the more efficient allocation of resources. There are winners and losers, with the benefits spread relatively thinly across the wider economy, and the costs concentrated on a smaller number of losers.

Lower tax rates for the many come at a cost of a loss of valuable tax breaks or government services for the few.

The process of adjustment that delivers growth is often slow and painful, with new investment and growth following dislocation and unemployment.

For example, the closure of car manufacturing would see skilled labour and other scarce resources shift to activities more suited to the Australian economic environment, but it would not be a perfectly smooth transition. Some workers would be unemployed for a prolonged period. People with industry-specific skills could be left permanently worse off.

The same would be true of reform of the pharmacy sector, which would reduce the cost of distributing drugs through the Pharmaceutical Benefits Scheme. Many pharmacists would see the value of their businesses decline, and some may have to find employment in other industries.

Yet this is the kind of painful adjustment economists say is necessary if we want high income growth for the majority of Australians in the years ahead.

Of course, adjustment of that sort occurs every day as a result of shifts in consumer tastes, changes in technology and other market forces. Some of the reforms we are talking about would simply be exposing artificially sheltered industries to the same market forces that affect the rest of the community. But that doesn’t lessen the shock, or the political risks for the government that unleashes it.

Abbott can reduce those risks now by leading the campaign to persuade the public of the need for reform, and by making the reforms as comprehensive as possible, so that those who lose from one change, stand a good chance of gaining from another.